Roe Corporation owns 2,000 shares of WRJ Corporation stock. WRJ Corporations has

Question

Roe Corporation owns 2,000 shares of WRJ Corporation stock. WRJ Corporations has 25,000 shares of stock outstanding. WRJ paid $4 per share in cash dividends to its stockholders. The entry to record the receipt of these dividends is?
A) Debit cash, 8,000; credit long-term investment, 8,000 B)Debt Long-term investment; credit cash 8,000 C) Debit cash 8,000; credit dividend revenue 8,000 D) Debit unrealized gain-equity 8,000; credit cash 8,000 E) Debit cash 8,000; credit unrealized gain-equity 8,000 Roe Corporation owns 2,000 shares of WRJ Corporation stock. WRJ Corporations has 25,000 shares of stock outstanding. WRJ paid $4 per share in cash dividends to its stockholders. The entry to record the receipt of these dividends is?
A) Debit cash, 8,000; credit long-term investment, 8,000 B)Debt Long-term investment; credit cash 8,000 C) Debit cash 8,000; credit dividend revenue 8,000 D) Debit unrealized gain-equity 8,000; credit cash 8,000 E) Debit cash 8,000; credit unrealized gain-equity 8,000
A) Debit cash, 8,000; credit long-term investment, 8,000 B)Debt Long-term investment; credit cash 8,000 C) Debit cash 8,000; credit dividend revenue 8,000 D) Debit unrealized gain-equity 8,000; credit cash 8,000 E) Debit cash 8,000; credit unrealized gain-equity 8,000

Explanation / Answer

SOLUTION

Option C is correct

Total dividend paid = No. of shares * dividend per share

= 25,000 shares * $4

= $100,000

Dividend received by Roe corporation = 2,000 shares * $4

= $8,000

The entry to record the receipt of dividends -

Cash would be debited with $8,000 and dividend revenue will be credited with $8,000

Cash is debited becuase it is an asset and is is increasing. Receipt of dividend is revenue in nature, so it is credited.

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